This is a blog that I started in october 2010, mainly for discussing my ideas on the economy, taxation and politics. Please add comments - I'll do my best to reply. If you are new, I would recommend watching one of my YouTube presentations (in French or English). You can download a fully indexed pdf version (over 600 pages) here.

29 Jan 2017

More on the Universal Universal Basic Income

Yesterday, I made the radical suggestion that we could give everyone on the planet an unconditional basic income fixed at 50% of the local median income financed by a 0.1% univeral flat rate financial transaction tax on all electronic financial transactions.

I noted that 50% for everyone was actually probably excessively generous - particularly if it was provided for everyone, including children. There is indeed another problem that would arise if you provided the basic income to children : it would provide direct encouragement for people to have lots of children, thus worsening the already very dangerous increase in world population levels, expected to reach over 11 billion by the end of the century.

There are various options that could be envisaged. One is to not provide the income to children at all, but this would of course penalize countries where the proportion of children is particularly high. The Worldbank provides figures for the percentage of the population aged 0-14 years by country, and the disparities are enormous. European countries typically have figures in the range 13-20%, whereas in Africa the percentages of children are often between 40-50%. Simply not providing money for children would therefore be very unfair, especially for the countries in Africa that need help most.

I see two options. One would be to calculate the amount for each country on the basis of the total population (including children), and then redistribute the money as a basic income to the adult population, effectively meaning that in countries where the percentage of children was high, the basic income rate would be a higher proportion of the median income. This seems fairly sensible and would effectively provide a bias in favour of third world countries.

The second option would be provide the money for children at the same rate as for adults, but to give the money not to the parents of the children, but to authorities in charge of education and medical services for children, including governments when those governments are functional, or charities. That way, children would directly benefit, but without encouraging an increase in the birth rate.

Incidentally, I suspect that providing a basic income to people in African countries with very high birth rates would also have a direct effect on the birth rate itself. The reasons for the high birth rates in Africa are no doubt complex, but it is likely that at least one factor lies in the absence of any real support for people in their old age. By having lots of children, people may well feel that they are increasing the probablity that there will be someone around to look after them when they get old.

Overall, taking into account these arguments, I think that it is quite reasonable to choose a lower value for the percentage of median income used to calculate the basic income payments. For example, if the overall value was fixed at 25% instead of 50%, this would firstly halve the total cost of the program to $5.3 trillion and mean that a global FTT of around 0.05% would be sufficient to finance the entire program. But, if the children's allowances were distributed among the adults, it would mean that while in a European country where 15-20% of the population are children, the rate of the income would be around 30% of median income, in African countries with 40-50% children, the basic income would be closer to 50% of median income.

I note that this sort of direct aid for developing countries will not only improve the quality of life enormously for people in those countries, it would also dramatically decrease the migration pression that currently leads huge numbers of young Africans to attempt the very dangerous journey to Europe in the hope of a better life. But if you have the choice between a guaranteed revenue equal to nearly 50% of median income in your home country or 30% of median income in Europe, why would you risk your life trying to get to Europe? This would be particularly true if in Europe, the basic income payments were only made to bona fide citizens or people who were legally present. Indeed, I have already noted that this argument is one that might make the introduction of an Unconditional Basic Income a popular move for anti-immigrant populists like Marine LePen and Nigel Farage and Donald Trump.

A final comment concerns the issue of how such payments could be made in places where conventional banking is limited or non-existant. How do you make payments to people in Africa who almost certainly don't have bank accounts? We certainly would not want trucks full of cash driving around handing out money! Actually, with the introduction of cash free electronic banking, the solutions are already there. It would be perfectly feasible to provide all adults with mobile phones and an electronic bank account that can be directly credited every month with the basic income payments. Cyclos 4 is a fully developed system for banking that has been developed by the STRO (Social TRade Organisation) for exactly such purposes, and already used by 5 million users worldwide. It could easily be used to set up systems in every country.